UCSD racks up two Nobel laureates in economics

Two professors who have spent years working together at UC San
Diego were awarded the Nobel Prize in Economics on Wednesday,
further swelling the number of Nobel laureates produced by the
university.

Clive W. J. Granger, 69, a British subject, and American Robert
F. Engle, 60, are the recipients. Both are at other universities
this fall: Granger as a visiting scholar at Canterbury University
in New Zealand, and Engle at New York University.

Founded in 1959, UCSD has rapidly risen in prestige in its brief
history, becoming one of the top schools in such technological
fields as bioengineering. The awards, which bring to 15 the number
of faculty members who have received Nobel Prizes, give more
attention to the university's strength in the social sciences.

The winners were honored for their contributions in developing a
tool in economic forecasting called "time-series econometrics."
This deals with information collected over a period of time, such
as changes in housing prices.

Granger developed a method of dealing with more than one related
variable, making it possible to determine cause and effect between
them. Engle discovered how to factor in patterns of apparently
random fluctuations in data, such as the value of stocks and other
financial instruments. These fluctuations actually vary in
intensity over time, with larger periods of change followed by a
period of smaller swings.

The research by the two is important to making predictions of
economic activity, said Alan Gin, an associate professor of
economics at the University of San Diego. Gin prepares the monthly
Index of Leading Economic Indicators for San Diego County.

Joan Anderson, a professor of economics at the University of San
Diego, said she knows both Granger and Engle, and teaches an
economics class that uses their methodology to study real estate
prices in San Diego County.

"It is a technique for modeling the pattern that the data has
followed over history," Anderson said. "The assumption is that the
path it's followed in the past will continue to be followed in the
future, and you use that as a forecasting tool."

In her class, Anderson's students are looking at house median
prices and the number of sales per month, going back to the start
of the 1990s.

"Prices actually slumped in the early '90s, then they started
up, and there's also some dips, some ups and downs," Anderson said.
"What these tools do is help you in a model to pick up that past
pattern. Once you've got the pattern of the data, then presumably
you can predict that into the future.

"For a lot of data, it has a reasonably good track record of
forecasting, and it's much less expensive than these great big
econometric models. It was a pretty revolutionary breakthrough in
ideas."

Refinements and extensions to Engle's and Granger's work
continue today, Anderson said.

Granger joined the university's faculty in 1974, stressing
research in statistics, econometrics, forecasting finance and
demographics. He has written 10 books on economics and had about
200 research papers published or submitted for publication.

Engle joined UCSD in 1977, and was chairman of the Department of
Economics from 1990 to 1994.